2.8.5 Minority stakes

2.8.5 Minority stakes

A minority stake is defined as a shareholding in a legal entity which does not provide the investor with sufficient voting rights to protect their interests. This is usually the case where the investor has less than a quarter of the total voting rights.

A society is entitled to invest some of its general reserves in other legal entities, as long as it acts within its rules and the amount invested should not be so large as to adversely affect its own liquidity or solvency, should the legal entity encounter financial difficulties. It should seek to invest in a way that best serves the business interests of the society, typically in the form of secured loans, bonds or debenture. Shares should only be purchased if the legal entity is listed on a stock market, the shares are redeemable or withdrawable, or there is some other arrangement in place to allow the society to sell its investment.

A society should not raise share capital to acquire minority stakes in other legal entities.